#AskTheTaxWhiz: Why is income tax return filing so burdensome?
Dear Mr Tax Whiz,
I want to file and to pay taxes but there is really no easy way to do it.
While other countries have adopted a more advanced technology in tax filing and payment system to make it simple, easy, and convenient for taxpayers to pay their taxes, the Bureau of Internal Revenue (BIR) seems to be doing exactly the opposite.
Because of the new and complicated regulations on filing the annual income tax return (ITR), I had to hire an accountant after decades of doing it myself.
Now, even the accountant I hired had to ask a tax consultant since BIR cannot answer our questions.
How are we supposed to comply when nobody seems to understand the scope and implications of the new regulations to a senior citizen taxpayer like me? Are we required to file? Can we file manually? How about my children? Can we just file one annual income tax return as a family?
A more serious threat to us is the imposition of penalties. The government has extended some privileges to senior citizens, but those of us still working is still paying income tax and worse, subject to overly burdensome BIR regulations.
As such, what I want to know, and also for my children who are either professionals or working abroad if they need to file, or not.
Can you give a summary list of those taxpayers who required to file an income tax return manually or via eFPS (electronic Filing and Payment System) or eBIR facilities? And also those who are not required or exempted to file income tax return?
Furious Grandma (Name withheld)
Dear Furious Grandma,
I understand your predicament as a taxpayer and as a senior citizen hoping to be relieved from the complicated tax system we have right now.
Other countries may have adopted a computerized tax system but they maintained a manual filing and payment system as an option for their taxpayers.
For instance, in Japan, you can pay through convenient stores like 7-Eleven or look for a kiosk to file and to pay your taxes, or you can walk-in and accomplish a form in any of their offices.
Unfortunately, income tax exemption is not part of the benefits and privileges given to our senior citizen taxpayers. And only married individuals may consolidate and file one ITR – all family members will have to file separate ITR, if required.
Regarding the penalties BIR may impose for non-compliance to eFPS and eBIR requirements, Senator Bam Aquino already asked Commissioner Kim Henares to postpone it to next year. The Tax Management Association of the Philippines (TMAP) also submitted a similar position to BIR. Worst scenario, we may have to file a TRO to the courts to stop BIR from imposing penalties to taxpayers.
As requested, here is the summary list of taxpayers, required, exempted or not required to file income tax return on April 15 deadline. This is also available in the BIR website:
You are required to file an ITR if:
1. You are a Filipino citizen living in the Philippines, receiving income from sources within or outside the Philippines, and if:
- You are employed by two or more employers, any time during the taxable year
- You are self-employed, either through conduct of trade or professional practice
- You are deriving mixed income. This means you have been an employee and a self-employed individual during the taxable year
- You derive other non-business, non-professional related income in addition to compensation income not otherwise subject to a final tax
- You are married, employed by a single employer, and your income has been correctly withheld – the tax due is equal to the tax withheld – but your spouse is not entitled to substituted filing
- You are a marginal income earner
- Your income tax during the past calendar year was not withheld correctly – if the tax due is not equal to the tax withheld
2. You are a non-resident citizen – if you are a Filipino who works or resides abroad and receiving income from sources within the Philippines. Note, however, that you are taxable only for the income you earn from the Philippines.
3. You are not a Filipino citizen but you receive income from sources within the Philippines, regardless of your residency. You are taxable only for the income you earn from the Philippines.
4. Domestic corporations (including partnerships) receiving income from sources within and outside the Philippines.
5. Foreign corporations (including partnerships) receiving income from sources within the Philippines.
6. Estates and trusts engaged in trade or business.
File ITR using eFPS if you are:
- Large taxpayers duly notified by the BIR
- Top 20,000 private corporations duly notified by the BIR
- Top 5,000 individual taxpayers duly notified by the BIR
- Taxpayers who wish to enter into contracts with government offices
- Corporations with paid-up capital stock of P10 million ($224,517.32)
- PEZA-registered entities and those located within Special Economic Zones
- Government offices, in so far as remittance of withheld Value Added Tax (VAT) and business tax is concerned
- Per Revenue Regulations 10-2014, Taxpayer Account Management Program (TAMP). Taxpayers, whether individual or juridical entities, who have been identified by the Revenue District Office (RDO) based on selection criteria pursuant to existing revenue issuances
Non-eFPS filers covered by RR 5-2015 are mandated to use the eBIR to file their ITR. These are:
- Accredited tax agents/practitioners and all its client-taxpayers
- Accredited printers of principal and supplementary receipts/ invoices
- One-Time Transaction (ONETT) taxpayers
- Those who shall file a “no payment” return
- Government-owned or controlled corporations (GOCCs)
- Local Government Units (LGUs), except barangays
- Cooperatives registered with National Electrification Administration (NEA) and Local Water Utilities Administration (LWUA)
The following taxpayers may file manually “no payment returns” to the RDO where registered using officially printed forms/photocopies or electronic/computer-generated returns:
- Senior Citizen (SC) or Persons with Disabilities (PWD) filing for their own ITR
- Employees deriving purely compensation income and the income tax of which has been withheld correctly showing tax due is equal to tax withheld whether single or multiple employers (with two or more employers concurrently and successively at any time during the taxable year)
- Employees qualified for substituted filing under RR 2-98 Sec. 2.83.4, as amended, but opted to file for an ITR and are filing for purposes of promotion (Philippine National Police /Armed Forces of the Philippines), loans, scholarship, foreign travel requirements, etc.
You are not required to file an ITR if:
- You are a minimum wage earner.
- Your gross income (total earned for the past year) does not exceed your total personal and additional exemptions.
- Your income derived from a single employer does not exceed P60,000 ($1350.13) and the income tax on which has been correctly withheld.
- Your income has been subjected to final withholding tax.
- You are qualified for substituted filing.
You are exempted from filing ITR if:
1. You are a non-resident citizen who is:
- A Filipino citizen not residing in the Philippines, but who has established with the BIR that you wish to remain living outside the country.
- A Filipino citizen who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for permanent employment.
- A Filipino citizen who works and earns income abroad.
- A Filipino citizen previously considered a non-resident citizen.
2. You are an overseas Filipino worker whose income is derived solely from sources outside the Philippines.
3. If you are a Filipino citizen working as an overseas seaman, your vessel must be engaged exclusively in international trade.
Despite being burdensome, I still encourage all taxpayers to be vigilant and to call BIR offices for assistance.
Do not deal with fixers or entrust your ITR to anybody. Filing ITR and paying the right taxes is our civic duty as Filipino citizen.
For more tax inquiries, please call us at +632 622 7720 or email us at firstname.lastname@example.org.
Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social consulting enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon's tax handbook, Got a Question About Taxes? Ask the Tax Whiz! is now available in bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at email@example.com.
$1 = P44.44